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TMI Blog2017 (1) TMI 1471X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm, is as good as transfer to M/s Sahara India Commercial Corporation Ltd., having a share of 90% in the firm and that such transfer of land to firm is only a colorable device to avoid payment of tax? ii. Whether Tribunal has erred in law in holding that full value of consideration in respect of transfer of land shall be the amount recorded in the books of the firm only as per Section 45 (3) of Act, 1961? (iii) Whether Tribunal has erred in law in holding that provisions of Section 50C of Act, 1961 cannot be invoked if registration of land, transferred, has not taken place, and no stamp duty has been paid as in the instant case? iv. Whether Tribunal has erred in law in holding that cost of acquisition in respect of transfer of land of 10,000 Sq.ft. will be cost of acquisition as on 1.4.81 whereas value of land in the books of Assessee was taken as NIL? (emphasis added) 4. Before answering aforesaid questions, it would be appropriate to have a bird eye view of relevant facts giving rise to present dispute. 5. Assessee, M/s Carlton Hotel Pvt. Ltd., Ranapratap Marg, Lucknow was lessee in possession of a ''Nazul' land, (measuring 364937 Sq.ft.) under the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dule of fixed assets in balance sheet filed along with return. During year in question, it entered into partnership and contributed 2,40,000 Sq.ft. of land, valued as per books, at the cost of Rs. 7,81,96,735/-, which was proportionate to cost vis-a-vis total area of land held by Assessee. The value of land, in the account of firm, was also reflected to the same amount i.e. Rs. 7,81,96,735/-. There was no difference in value shown in the book of accounts of Assessee as well as Firm. 13. Assessee further said that under Section 45 (3) of Act, 1961, "capital contribution of immovable property" brought in by partners is chargeable to ''capital gain' in the hand of partnership who brings in such share as ''capital'. Section 45 (3) then says that for the purposes of Section 48, amount recorded in the books of accounts of Firm, as the value of "capital asset", shall be deemed to be the full value of consideration received or accruing as a result of transfer of capital asset. Section 50C would not be attracted, as claimed by Assessee. Section 50C would be attracted only to those cases of transfer of immovable property where process of registration and payment of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not concerned in the present appeal. 16. In respect of aspects adjudicated against Assessee by CIT(A), further appeal before Tribunal was taken by Assessee, which has been decided vide impugned judgment and order dated 14.11.2008. Tribunal has allowed appeal. It has held that neither Section 50C of Act, 1961 could have been invoked in the case in hand, nor Assessee could have been denied benefit of Section 55 (2) (b), since it is an option given to Assessee to adopt either actual cost of acquisition of asset or paid market value of asset as on 01.04.1981, as the cost of asset under partnership. 17. As per partnership deed of the Firm, shares of profits of three partners were provided as under :- i. M/s SICCL 90% ii. M/s Carlton Hotel Pvt. Ltd. 05% iii. Shri I. Ahmad 05% 18. Capital contribution of three partners in the Firm is as under :- 1. M/s SICCL Rs. 1,36,37,700 (12%) 2. M/s Carlton Hotels (P) Ltd. Rs. 7, 81,96,735 (88%) 3. Mr. I. Ahmad Nil (0%) 19. Some of the terms and conditions of partnership deed which have been noticed by CIT(A) in its order dated 14.02.2008, may also be reproduced as under :- i) The share of the assessee in pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee has a little role in partnership business, which proves that it has already settled its score and alleged partnership was a cloak to otherwise deed of sale. The entire transaction is colourable and fraudulent. It is submitted that Tribunal while allowing appeal of Assessee, has ignored all these aspects and after discussing Section 50C of Act, 1961, has held that one of the ingredients to invoke Section 50C is that there is payment of stamp duty in respect of transfer of capital asset, being land or building or both, which will be required only when capital asset is registered under Registration Act, 1908 (hereinafter referred to as ''Act, 1908'). If payment of stamp duty for the purpose of transfer is not required, then there is no occasion to look into other conditions of Section 50C. It has also read Section 45 (3) in isolation and said that there is deeming fiction with regard to value of capital asset which has to be given full effect. Sri Mathur submits that Tribunal has not appreciated the matter in correct perspective. The element of fraud with Revenue, i.e. a cloaked transaction to evade Tax Liability has not been considered at all. It is a case of ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed judgment which constituted majority on this aspect), this Court has observed as under : "4430. In the Legal Glossary 1992, fifth edition, published by the Legal Department of the Government of India at page 589, the meaning of the word "Nazul" has been given as "Rajbhoomi i.e. Government land". It is an Arabic word and it refers to a land annexed to Crown. During the British Regime, immoveable property of individuals, Zamindars, Nawabs and Rajas when confiscated for one or the other reason, it was termed as "Nazul property". The reason being that neither it was acquired nor purchased after making payment. In the old record, we are told when they used to be written in Urdu, this kind of land was shown as "Jaidad Munzabta". 4431. For dealing with such property under the authority of the Lt. Governor of North Western provinces, two orders were issued in October, 1846 and October, 1848 wherein after the words "Nazul property" its english meaning was given as "Escheats to the Government". Sadar Board of Revenue on 20th May, 1845 issued a circular order in reference to Nazul land and in para 2 thereof it mentioned "The Government is the proprietor of those land and no valid title ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, privileges etc. on the land. The status of the land would not have changed in such a manner. Such a land could not be confiscated since it was already the land of the king but when a proclamation was issued for confiscating the land, meaning thereby the East India Company or the British Government did not follow the same principle. In our view, in such a matter, even the doctrine of "escheat" or "bona vacantia" may not be applicable 4437. The question as to who could have been owner of the land in 1528 AD when alleged that the disputed building was constructed by Babar through his Commander Mir Baqi, the concept sought to be canvassed is that law, whether Islam or Hindu Shastras, do not recognise any personal right of ownership upon immoveable property. The entire property within the suzerainty of the king belong to him, who had right to tax its subject in the form of tax or otherwise by realising share in the agricultural or other income in the immoveable property. The percentage of share may differ and that may not be relevant for our purpose. 4438. The second aspect of the matter is that since ancient time the right of ownership proceeded with possession and is recognize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ple of acquisition of property by escheat i.e right of the Government to take on property by escheat or bona vacantia for want of a rightful owner was enforced in the Indian territory during the period of East India Company by virtue of statute 16 and 17 Victoriae, C. 95, Section 27. 4440. We may recollect having gone through the history that several estates were taken over by British Company by applying the doctrine of lapse like Jhansi which was another kind of the above two principles. The above provisions had continued by virtue of Section 54 of Government of India Act, 1858, Section 20(3)(iii) of Government of India Act, 1915 and Section 174 of the Government of India Act, 1935. After the enactment of the Constitution of independent India, Article 296 now provides : "Subject as hereinafter provided, any property in the territory of India which, if this Constitution had not come into operation, would have accrued to His Majesty or, as the case may be, to the Ruler of an Indian State by escheat or lapse, or as bona vacantia for want of a rightful owner, shall if it is property situate in a State, vest in such State, and shall, in any other case, vest in the Union." 4441. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court said, " 'Act of State' is the taking over of sovereign powers by a State in respect of territory which was not till then a part of its territory, either by conquest, treaty or cession, or otherwise." 4448. To the same effect was the view taken by the Constitution Bench in Amarsarjit Singh Vs. State of Punjab AIR 1962 SC 1305 in para 12 as under : "It is settled law that conquest is not the only mode by which one State can acquire sovereignty over the territories belonging to another State, and that the same result can be achieved in any other mode which has the effect of establishing its sovereignty." 4449. In Thakur Amar Singhji Vs. State of Rajasthan AIR 1955 SC 504, in para 40, the Court said : "The status of a person must be either that of a sovereign or a subject. There is no tertium quid. The law does not recognise an intermediate status of a person being partly a sovereign and partly a subject and when once it is admitted that the Bhomicharas had acknowledged the sovereignty of Jodhpur their status can only be that of a subject. A subject might occupy an exalted position and enjoy special privileges, but he is none the less a subject ..." 4450. In S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 257, Court has observed that land and building in question is ''Nazul' property being property of Government maintained by State authorities in accordance with Nazul Rules but not administered as a State property. Court has also observed that lease of ''Nazul' land is governed in accordance with Government Grants Act, 1895 (hereinafter referred to as ''Act, 1895'). Section 2 and 3 thereto very specifically provide that provisions of Transfer of Property Act, 1882 (hereinafter referred to as ''Act, 1882') do not apply to Government land. Section 3 says that all provisions, restrictions, conditions and limitations ever contained in any such grant or transfer, as aforesaid, shall be valid and take effect according to their tenor, any rule of law statute or enactment of the Legislature to the contrary notwithstanding. Thus the stipulations in "Lease deed" shall prevail and govern entire relation of State Govt. and lessee. 28. After expiry of lease, if lessee continued in possession, he cannot ask for advantage of principle of holding over, recognized under Act, 1882, for the reason that his continued possession thereafter would become u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s without authority for such occupation, and includes the continuance in occupation by any person of the public premises after the authority (whether by way of grant or any other mode of transfer) under which or the capacity in which he was allowed to hold or occupy the premises has expired or has been determined for any reason whatsoever and also includes continuance in occupation in the circumstances specified in sub-section (1) of Section 7 and a person shall not, merely by reason of the fact that he had paid any amount as rent, be deemed to be in authorised occupation." "2(e) "public premises" means any premises belonging to or taken on lease or requisitioned by or on behalf of the State Government, and includes any premises belonging to or taken on lease by or on behalf of-. (i) any company as defined in Section 3 of the Companies Act, 1956, in which not less than fifty-one per cent of the paid-up share capitals held by the State Government: or (ii) any local authority; or (iii) any Corporation (not being a company as defied in Section 3 of the Companies Act, 1956 or a local authority) owned or controlled by the State Government: or (iv) any society registered under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms and conditions of the lease deed and the case law referred supra that there is no automatic renewal of lease of the property in question in favour of the original lessee" 36. Having said so, Court held that in absence of renewal of lease, status of original lessee in relation to disputed property was an "unauthorized occupant" in terms of Section 2(g) of Act, 1972. 37. It also said that any act on the part of DDA in respect of other communication would make no difference, since a "Public Premises" is to be dealt with by relevant statutory provisions including Act, 1971, Nazul Land Rules and DDA Act, 1957. Thus question-1 was answered by Court as under:- "30. Without examining the case in the proper perspective that the property in question being a Public Premises in terms of Section 2(e) of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 and that after expiry of lease period the original lessee has become unauthorized occupant in terms of Section 2(g) of the said Act in the light of relevant statutory provisions and Rules referred to supra and law laid down by the Constitution Bench of this Court in the Case of Ashoka Marketing Ltd. and Another (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition of law, when lease expired on 31st March, 1990, from 1st April 1990, Assessee became an "unauthorized occupant" of land in question. There was no occasion for him to maintain aforesaid land as part of its ''capital asset'. This explains the reason why it has disclosed value of land in books of account, ''Nil' as on 31st March, 2002. 32. Land came to be validly possessed by Assessee only with execution of Freehold Deed on 31st March, 2002. In other words, Assessee being a ''lessee' under lease dated 31st March, 1943, ceased to have lease rights over land on 31.3.1990, and had no title during this period which vested in State of U.P. Even Lease rights came to an end on 31st March, 1990. Thereafter Assessee got title over land on execution of Free Hold deed on 31st March, 2002, i.e. Financial Year (hereinafter referred to as ''F.Y.') 2001-02 and A.Y. 2002-03. Thus Assessee got a valid and legal title over property in dispute only on 31st March, 2002 when deed for freehold was executed in favour of Assessee by State. Freehold conversion charges paid by Assessee were Rs. 8,94,94,944/-, (though as a matter of fact the said charges w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1999, w.e.f. 01.04.2000; sub-section 2, w.e.f. 01.04.1985; sub section 2A, w.e.f. 20.09.1995. 41. For our purpose, it is sub-section (3) of Section 47 which is relevant and came to be inserted by Finance Act, 1987, w.e.f. 01.04.1988 which reads as under:- "47(3). The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. (emphasis added) 42. The term "transfer" is defined in Section 2 (47) of Act, 1961 which reads as under:- (47) "transfer", in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the words "cost of acquisition" and "cost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any improvement" had respectively been substituted: Provided also that nothing contained in the second proviso shall apply to the long-term capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government : Provided also that where shares, debentures or warrants referred to in the proviso to clause (iii) of section 47 are transferred under a gift or an irrevocable trust, the market value on the date of such transfer shall be deemed to be the full value of consideration received or accruing as a result of transfer for the purposes of this section : Explanation.--For the purposes of this section,- (i) "foreign currency" and "Indian currency" shall have the meanings respectively assigned to them in section 2 of the Foreign Exchange Manageme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..................................." 46. In Chapter IV of Act, 1961 some additions were made as special provisions for different purposes. For our purpose, it is Section 50C, inserted by Finance Act, 2002 w.e.f. 01.04.2003, made as a special provision, for full value of consideration in certain cases. It reads as under : "50C. Special provision for full value of consideration in certain cases.-- (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub-section (1), where- (a ) the assessee claims before any Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub-section (1) exceeds the fair market value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f previous year in which such transfer takes place. 49. The first question would be, whether in the present case, when Assessee transfers his land by way of "capital contribution" and becomes a partner in the firm, does it result in transfer in terms of Section 2 (47) of Act, 1961 or the term ''transfer' has to be construed in the light of Act, 1882. 50. We find answer to this question in Sunil Siddharth Bhai Vs. CIT, [1985] 156 ITR 509. Therein, Assessee was a partner in a firm M/s Suvas Trading Company, a partnership firm constituted under a deed of partnership dated 27 September, 1973. Assessee, as its capital contribution to the firm, made over certain shares held by him, as capital asset. Book value of those shares shown in the account books was Rs. 1,49,849/-. However, when Assessee contributed shares to the firm, he revalued shares at market value of Rs. 1,60,279/- and credited the resulting difference of Rs. 10,460/- to his capital account. Assessing Authority while making assessment for A.Y. 1974-75, in respect of Assessee, did not include difference in the assessable income. CIT was of the opinion that difference between market value of the share and cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apart from partners, constituting it, and equally in law, the firm as such has no separate rights of its own in the partnership assets and when one talks of firm's property or firm's assets, all that is meant is property or assets in which all partners have a joint or common interest. 53. Court in Sunil Siddhartha Bhai (Supra) also held that in a genuine transaction, transfer of "capital assets" by a partner into partnership firm does not amount to sale. Relying upon an earlier judgment in CIT Vs. Hind Construction Ltd., [1972] 83 ITR 211 (SC), Court observed, when Assessee made over its machinery to the partnership firm, there was no sale and Assessee did not derive any income. Similar view was taken by Madras High Court in CIT Vs. Janab N. Hyath Batcha Sahib, [1969] 72 ITR 528 (Mad.) that when a partner introduces his property into a partnership firm as his contribution to its capital, the transaction does not involve a sale of the property. High Court referred to Section 14 of Indian Partnership Act, 1932 (herein after referred to as "Act, 1932") and following observation was made :- "When a partnership is formed for the first time and one of the members of the partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital. 56. Court in Sunil Siddharthbhai Vs. CIT (supra), in taking above view, also relied and referred to its earlier decision in Addanki Narayanappa Vs. Bhaskara Krishnappa, AIR 1996 SC 1300, wherein it was observed that whatever may be the character of property which is brought in by the partners when partnership is formed or which may be acquired in the course of the business of the partnership, it becomes property of the firm and what a partner is entitled to is, his share of property, if any, accruing to the partnership from the realisation of this property, and upon dissolution of partnership, to a share in the money representing value of the property. No doubt, since a firm has no legal existence, partnership property will vest in all the partners and in that sense, every partner has an interest in the property of the partnership. During the subsistence of partnership, however, no partner can deal with any portion of property, as his own. Nor can he assign his interest in a specific item of partnership property to anyone. His right is to obtain such profits, if any, as fall to his share from time to time, and upon dissolution of the firm, to a share in the assets of the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution or upon retirement, realisation of a pre-existing right or interest. In this backdrop, Court said :- "Therefore, what was the exclusive interest of a partner in his personal asset is, upon its introduction into the partnership firm as his share to the partnership capital, transformed into an interest shared with the other partners in that asset. Qua that asset, there is a shared interest. During the subsistence of the partnership, the value of the interest of each partner qua that asset cannot be isolated or carved out from the value of the partner's interest in the totality of the partnership assets. And in regard to the latter, the value will be represented by his share in the net assets on the dissolution of the firm or upon the partner's retirement." (emphasis added) 59. Court also drew a distinction between realisation of pre-existing right by the partner on dissolution of firm or retirement and when such partner brings in his personal asset into the partnership firm as his contribution to capital. In the former case, there is no transfer for the reason that his shared interest in all the assets of the firm which is pre-existing before dissolution of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partner acquires on making over his personal asset to the partnership firm, as his contribution to its capital, can fall within the terms of Section 48. Since section 48 is fundamental to the computation machinery incorporated in the scheme relating to determination of charge provided in Section 45, such a case must be regarded as falling outside the scope of "capital gains" taxation altogether. 64. Another aspect considered by Court is whether it can be said that any profit or gain has arisen to a partner, when it brings in his personal assets into firm as its contribution to "capital". It was held that under Act, 1961, profit or gains must be understood in the sense of real profits or gains, on the basis of ordinary commercial principles on which actual profits are computed, a sense in which no commercial man would misunderstand, and this has been regarded as a principle of general application, recognized in Calcutt Company Ltd. Vs. CIT [1959] 37 ITR 1 (SC); CIT Vs. Bai Shirinbai K. Kooka[ 1962] 46 ITR 86 (SC); Poona Electric Supply Co. Ltd. Vs. CIT [ 1965] 57 ITR 521 (SC); CIT Vs. Biral Gwalior (P.) Ltd.[ 1973] 89 ITR 266 (SC). 65. When a partner makes over his personal asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "year of charge". By depiction, ''income' under the head "Capital gains" is deemed to be the income of previous year in which transfer, i.e. vesting of title is fixed. Any income by way of capital gains is assessed in the assessment year corresponding to the previous year in which transfer takes place. A transfer does not take place merely because an agreement is entered into or consideration is paid thereunder in whole or in part. The words denote that a title in property has passed from transferror to the transferee. No transfer can be said to be effected until all formalities for vesting of title in the transferee are completed. Hence, it is the date of transfer which is relevant, so that the assessment year would be the accounting year during which a taxable income falls. 69. In relation to acquisition of land, it was held that on the date of publication of notification for acquisition, property vest absolutely in Government, hence, that is the date of transfer for the purpose of capital gains as held in G.M.Omer Khan Vs. CIT (Addl.), 1992 196 ITR 269, whereby judgment of Andhra Pradesh High Court in Addl.CIT Vs. G.M. Omarkhan, [1979] 116 ITR 950 (AP) was followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant asset to a Valuation Officer in accordance with section 55A of the Income-tax Act. If the fair market value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the Assessing Officer may take such fair market value to be the full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purposes, the Assessing Officer shall not adopt such fair market value and shall take the full value of consideration to be the value adopted or assessed for stamp duty purposes. 37.4 This amendment will take effect from 1st April, 2003 and will, accordingly, apply in relation to the assessment year 2003-04 and subsequent years." (emphasis added) 72. Section 50C requires adoption of value or as per basic evaluation register, on the basis of which stamp duty is reckoned. Tribunal has excluded application of Section 50C and finds it sufficient to look into the declaration made by Assessee in the partnership deed about value of immovable property, put in the share, assessed by firm, by holding that there is no consideration, no requirement of payment of sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as narrated into share of individual partner in the partnership firm, such share of the partner in the asset of partnership which also have immovable property and assignment of such share does not require registration under Section 17 of Act, 1908. But here is a situation where partnership is being brought into existence wherein one of the partners contributes his entire immovable property as partnership stock and that is how transfer is made to the partnership Firm, consisting of more than one partners. Apparently contributing partner is limiting his interest in immovable property and creating interest of others therein. 78. A distinction has to be made about share of a partner in the assets of partnership which has immovable properties and its assignment of movable property. Where immovable property itself is put in the stock, reducing interest of a partner, owning property, and creating rights of other partners therein, it would be covered by Section 17 (1) (b) of Act, 1908. Here, we may refer to decision in B.T. Patil Vs. Commissioner of Gift Tax, 2003 9 SCC 172, wherein it was held that allotment or distribution of an asset or some of the assets of a Firm, by the Firm, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into a partnership. As its share of capital, it transferred stock of machinery to partnership firm. Court held, when Assessee made over its machinery to partnership firm, there was no sale, and Assessee did not derive any income. This view has been taken by various High Courts, including this Court also in CIT Vs. Janab N. Hyath Batcha Sahib, [1969] 72 ITR 528 (Mad). Court held, when a partner introduces his property into a partnership firm as his contribution to its capital, the transaction does not involve a sale of property. Referring to Section 14 of Act, 1932, Court said, when a partnership is formed for the first time and one of the members of the partnership brings into firm's assets, they become property of the firm, not by any transfer, but by the very intention of parties evinced into the agreement between them, to treat such property belonging to one or more of the members of partnership as that of the firm. Similar view was taken by this Court in Dr. Kackkar Vs. CIT, [1973] 92 ITR 87 (All.), holding that a partner when hands over a business asset to a partnership firm as his contribution to its capital, he cannot be said to have effected a sale. Kerala High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rings his asset into the partnership Firm as his contribution to its capital. An exclusive interest in it before it enters the partnership, is reduced on such entry into a shared interest. In Sunil Siddharthbhai Vs. CIT (supra), Court also observed that transfer of personal asset to partnership firm need not result in capital gains to such partner within the contemplation of Section 48 of Act, 1961 so as to attract Section 45 of Act, 1961. This is why Section 45 of Act, 1961 stood amended in 1987 by insertion of sub-section 3, but yet this aspect will depend on the fact that partnership firm is genuine, there is no sham or unreal transaction, and assets of the Firm represents a genuine intention to contribute to the share capital of the firm for the purpose of carrying on the partnership business. 85. In CIT Vs. H.H. Maharani Sethu Parvathi Bayi, [1998] 232 ITR 678, Court held , when such an issue is raised, Tribunal should have enquired into the real nature of transaction. It is the bounden duty of Tribunal to make appropriate enquiry in such matter when such an issue is raised by the Revenue. 86. In the present case as we have already discussed, entire consideration for free-ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are unwilling or unable to profit by it. The ethics of transferring burden of tax liability to the shoulders of guideless, good citizens from those of the "artful dodgers" is per se objectionable. We live in a welfare State, whose finances are founded on the tax collected by State from its people. Tax must be paid in accordance with law. Law must be respected and honoured in words and spirit. No equity, no sympathy, no leniency is called for a person engaged by devoting not only substantial time and money of himself but by engaging other experts in the field to find out ways and means for shirking away from the responsibility of payment of tax. We should recognize that behind taxation laws, there is as much moral sanction as behind any other welfare legislation. It is a pretense to say that avoidance of taxation is not unethical and that it stands on no less a moral plane than honest payment of taxation. 89. The proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether transaction is such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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